This dissertation picks the influence of proximity on the innovative behavior of firms out as a central theme. We concentrate on geographical and technological proximity and investigate their impact on learning through knowledge spillovers and the technological outcome in the form of product and process innovations. We argue with the help of an agent-based simulation model which incorporates innovation dynamics, endogenous location decisions, complex learning functions, and a changing technology space which is also related to the preferences of consumers. Several new insights concerning firm strategy and regional innovation policy are discussed in detail.